1. FX Outlook
  2. Daily FX Report


Second-quarter German GDP was reported as –0.2% after a 0.3% contraction the previous quarter which confirmed a technical recession for the economy.

The German consumer prices inflation rate declined to 6.2% for July from 6.4% previously and in line with market expectations.

Although consumer confidence improved slightly for July, there was a dip in business confidence and the overall Euro-Zone business and consumer survey declined to 94.5 from 95.3 and below expectations of 95.0.

There were further doubts whether the ECB would increase interest rates again at the September policy meeting, but the Euro was resilient at lower levels.

The weaker than expected US inflation data also curbed dollar support and the Euro moved back above the 1.1000 level.

The Euro peaked just below 1.1050 before settling around 1.1015 with interest in selling on rallies.

CFTC data recorded only a small decline in long Euro positions in the latest week with the total still over 177,000 contracts, maintaining the potential for position adjustment. On Monday, there will also be month-end position adjustment which could spark volatility.

ECB President Lagarde stated reiterated that there could be a September rate hike or a pause. The Euro was unable to make any further headway on Monday, but held just above the 1.1000 level against the US dollar. Month-end position adjustment will be a key element later on Monday.


The US PCE prices index increased 0.2% on the month with the year-on-year rate declining to 3.0% from 3.8% previously and slightly below consensus forecasts of 3.1%. Core prices also increased 0.2% on the month with the year-on-year rate declining to 4.1% from 4.6%. This was slightly below market expectations of 4.2% and the lowest reading since November 2021.

The employment cost index increased 0.9% for the second quarter, slightly below consensus forecasts of 1.0% and compared with a 1.2% increase the previous quarter. Treasuries rallied after the data with the 10-year yield back below the 4.00% level which curbed potential dollar support.

There was another positive inflation development on the day with the Dallas trimmed mean price index declining to an annualised rate of 2.5% from 3.2% previously.

There was further very volatile yen trading during the day. Overall, markets concluded that the Bank of Japan would maintain a very dovish policy and the dollar rallied strongly to above the 141.00 level. Minneapolis Fed President Kashkari reiterated that the September policy decision is data dependent.

Chinese PMI data was mixed with the manufacturing PMI index edging higher to 49.3 from 49.0 previously and above expectations of 48.9.

The non-manufacturing index, however, retreated to 51.5 from 53.2. Markets tended to focus on the potential for further policy stimulus.

The yen remained under pressure amid expectations of a very dovish policy stance with the dollar strengthening to highs just above 141.90 before a slight correction.


There were no significant UK developments on Friday with the overall yield trends continuing to underpin the UK currency with domestic benchmark yields moving higher on the day. Risk conditions were also benign, especially after the US data releases with the FTSE 100 index edging higher to a fresh 2-month high.

Sterling found support below 1.2800 against the dollar and rallied to above 1.2850 while the Euro settled little changed around 0.8575.

CFTC data recorded a small decline in long Sterling positions to 59,000 in the latest week from just below 64,000 the previous week. There is still scope for a further closing of long positions, especially if there are more dovish expectations surrounding the Bank of England policy meeting.

Sterling held close to 1.2850 against the dollar on Monday with the Euro just below 0.8570 as Sterling overall held a firm tone.


The KOF business confidence index strengthened to 92.2 for July from 90.7 previously and above consensus forecasts of 90.5. The franc overall lost significant ground on Friday amid the firm risk tone. The Euro recovered to the 0.9585 area while the dollar advanced to 0.8735 before a retreat to below just below 0.8700.

The franc edged weaker on Monday with the Euro close to 0.9600 and the dollar edging higher to 0.8715.

Technical Levels 

Tables 1 (186)

Economic Calendar

Fx Daily Calendar 31072023



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